Who: The Advertising Standards Authority (ASA) and Financial Conduct Authority (FCA)
Where: United Kingdom
When: 8 October 2023
Law stated as at: 6 October 2023
What happened:
The FCA has taken over from the ASA in respect of the regulation of technical claims in ads for most crypto assets in non-broadcast media. Last month, the FCA introduced new rules in respect of ads for “qualifying cryptoassets”, which are cryptoassets that are transferable and fungible, including cryptocurrencies and utility (fan) tokens.
Cryptoassets are defined by the FCA as: “cryptographically secured digital representations of value or contractual rights that use some type of distributed ledger technology (DLT) and can be transferred, stored or traded electronically.” Cryptoassets have become increasingly popular in the UK and there is a general feeling that a lot of the terminology used in ads for these products will be new and confusing to a lot of consumers, increasing the risk of misleading advertising.
The FCA rules will apply to all firms that market qualifying cryptoassets to UK consumers, regardless of which country they are based in, or the technology used. Cryptoassets are classed as “restricted mass market investments”, which means that they can be marketed to UK consumers subject to the overarching requirement that financial promotions must be fair, clear and not misleading. Cryptoassets themselves will remain unregulated. The new rules will not cover cryptoassets that are “non-fungible”; for example, NFTs (non-fungible tokens) or “limited payment tokens” that can be redeemed and used for the payments of goods and services such as non-monetary customer loyalty points. (See our Insight for more details.)
The rules include:
- requirements to include clear risk warnings, which have been found to be effective at improving consumers’ perception and understanding of the risks of investment; and
- a ban on benefits that incentivise investment activities, such as “refer a friend” bonuses and new joiner bonuses.
The ASA will work with the FCA where needed, as it remains the regulator of all finance-related broadcast advertising in Ofcom-regulated television and radio services. The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) (which covers non-broadcast ads) will still apply to the ‘non-technical’ aspects of ads for products by FCA-regulated business, such as matters relating to offence, social responsibility, superiority claims, fear and distress, denigration and other claims that do not relate to specific characteristics of the product.
Why this matters:
The ASA has received a number of complaints in recent years regarding financial ads that failed to clearly illustrate the risk of investing in certain cryptoassets. Multiple ads have not made clear that taxes had to be paid on the profits from investing in crypoassets, and advertisers have been considered to be taking advantage of consumers’ inexperience in this area.
The ASA will continue to investigate any complaints about the truthfulness of claims made about such products, which do not relate to the specific characteristics of the product. Advertisers will still need to hold evidence to support any claims about the non-technical aspects of the product in order to comply with rule 3.7 of the CAP Code. Complaints about the technical aspects in non-broadcast ads will be referred to the FCA, and the Committee of Advertising Practice has reflected this change in scope in its advice and guidance.
